Calculating a Retirement Benefit Under the
DPS Benefit Structure

Your DPS benefit is based on your years of service credit and your age at retirement. It is calculated using a percentage of your Highest Average Salary (HAS).

HAS under the DPS benefit structure is the average monthly salary of the 36 months of earned service having the highest salaries if you were eligible to retire on January 1, 2011.

If you were not eligible to retire on January 1, 2011, your HAS is one-twelfth of the average of the highest annual salaries on which contributions were paid that are associated with three periods of 12 consecutive months of service credit. The three 12-month periods do not have to be consecutive or the last three years of employment. In calculating your HAS, PERA determines the highest annual salaries associated with four periods of 12 consecutive months. The four 12-month periods selected do not have to be consecutive nor do they have to include the last four years of employment. The lowest of the four periods becomes the base year used as a starting point for the annual limit on salary increases. The annual limit will apply regardless of when the annual salaries used in the HAS occurred. Your annual salary increase limit is 8 percent.

For more information on how HAS is calculated, see the Highest Average Salary Calculation fact sheet.

Any money placed in a Section 125 flexible spending account is not considered salary. So, if you contribute to a Section 125 plan to reduce your salary during one or more of the periods used in the HAS calculation, your HAS will be reduced. Subsequently, the amount of your PERA benefit will be lower. For more information, refer to the PERA & Section 125 Plans brochure.

If you receive a cash payment based on unused annual leave, vacation time, or personal leave at termination of employment, it will be included as salary with member and employer contributions reported on it. Note: If you use the Highest Average Salary Calculator to estimate your HAS and you receive this type of cash payment, your HAS will be inflated. For service credit, such a payment will be projected forward at your regular monthly rate of pay. See Colorado PERA's Accrued Leave Policy fact sheet for more information.

DPS has four Highest Average Salary Percentages tables. See the HAS Percentages Tables page for more information.

Calculating Your Benefit

Example of Options A, P2, and P3 Benefits

The example below uses a retiring member with 25 years of service credit at age 60, with a cobeneficiary who is age 57.

1. Calculate HAS

2. Calculate Option A
Multiply the HAS in number 1 above by the benefit percentage on the DPS Highest Average Salary Percentages table. Table 8 is used in this calculation. See the HAS Percentages Tables page. Note: Years of service in the Highest Average Salary Percentages table show full years only; you receive credit for each month that you work.

*Up to the maximum allowed by law, see Federal Limits on Benefits below.

3. Calculate Option P2
Multiply the Option A amount by the percentage from the Current Option Percentages table Option P2 below. (The cobeneficiary receives half the benefit amount the retiree received before death.)

Current Option Percentages Effective March 1, 2010
(Rounded to 3 decimals; actual factors are 6 decimals)
Tables are revised periodically to account for changes in life expectancies and other factors

4. Calculate Option P3
Multiply the Option A amount by the percentage from the Current Option Percentages table Option P3 below. (The cobeneficiary receives the same amount the retiree received before death.)

Current Option Percentages Effective March 1, 2010
(Rounded to 3 decimals; actual factors are 6 decimals)
Tables are revised periodically to account for changes in life expectancies and other factors

Example of Option B Benefit

An Option B benefit annuitizes a retiring member's account balance at time of retirement to determine the monthly benefit amount and the number of monthly benefit payments.

Example: Retiree begins receiving a monthly benefit and dies after 60 months. The Option B beneficiary then begins receiving the same monthly benefit amount. After receiving 20 months of monthly benefits, the Option B beneficiary dies and the remaining amount is then paid to the estate in a lump-sum amount equal to the value of the remaining 30 benefit payments. There are no further payments on the account.

Conversion of Leave

Unused annual leave, vacation time, or personal leave converted to a cash payment at termination of employment is includable as salary with member and employer contributions reported on it. Generally, this payment is made in a lump sum to you in your last month of pay. (A cash payment based on unused sick leave is not includable as salary.)

Because the cash payment is not compensation for services rendered in the last month of employment, PERA projects this payment out into future months using your monthly rate of pay. For example, a cash payment of $3,400 is made to you in January (the terminating month) and your monthly rate of pay is $2,500; $2,500 of the payment would be projected into February and the remaining $900 would be projected into March. You would earn two more months of service credit and, for most retiring members, the HAS would increase slightly.

Federal Limits on Benefits

If you are under the DPS benefit structure, choose Option P3, and name someone other than your spouse who is more than 10 years younger than you as your cobeneficiary, the amount that continues to you cobeneficiary at your death could be limited in accordance with percentages required by the Internal Revenue Code regulations.

Benefits paid under the DPS benefit structure are subject to a federal annual limit on the amount of retirement benefits that PERA retirees may receive under Internal Revenue Code (IRC) Section 415. IRC Section 415 benefit limits are designed to prevent individuals from accruing excessive pension benefits on a tax-deferred basis.

PERA has developed a process called a Replacement Benefit Arrangement that provides for your employer to pay you the amount you are not being paid by PERA because of the federal tax limit. This is done at little or no cost to the employer.

For more information on how this limit may affect your future DPS retirement benefit, see the Federal Limits on Benefits page.

For more information on PERA retirement benefits view, print or order the PERA Retirement Process booklet.

Also view:

• HAS Percentages Tables

• PERA's Benefit Calculators

• Highest Average Salary Calculation fact sheet